This Commercial Real Estate issue contains the following articles: Building and Maintaining a Solid Family Business, Deposit Bonds – For Those Who Prefer Liquidity, Peace of Mind and Potential Savings – what could be bad? and a Case Study: Real Estate Developer Benefits from more than $8 million in Tax Savings.

1. HotTopics
CommercialRealEstate
Reduce Taxes. Maximize Cash Flow. Minimize Risk.
MAY 2016 | ISSUE NO. 03
BuildingandMaintaining
aSolidFamilyBusiness
BY MARC J. MINKER, CPA, PFS
F
amily businesses are an often overlooked form of ownership, yet it is estimated
that 90 percent of all U.S. businesses are family-owned, and one-third of all
companies in the S&P 500 index started as a “family business”. Often they start
as a small business founded
by a parent or a couple who
want to give their children
work experience doing small
tasks – answering phones,
filing, sweeping up the office,
etc. From simple beginnings
can spring a legacy that
transitions from generation
to generation.
Assuming a solid foundation
has been built, family
businesses can be a huge
success. Family-based
business culture and shared values can provide strategic direction, continuity and
customer appeal. On the flip side, closely held business owners may face unique
challenges when family members are active. Varying goals, personalities, expectations,
family feuds and politics can all play into the mix; however, they can be managed with
proper structure and thoughtful planning.
Like any other family business, if a family-owned real estate company is built on an
organized and solid foundation, it will be ready for all the challenges the business may
encounter. Several key aspects of business structure are therefore important:
Communication Is Fundamental
In any business, family or not, there are always differences that exist in the views
and opinions of members in the workplace. In a family business, small differences
(Continued on page 2)
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© Copyright 2016. CBIZ, Inc. NYSE Listed: CBZ. All rights reserved.
CBIZ’s Real Estate practice is
uniquely positioned to help you
minimize risk and capitalize on
market opportunities.
We work with owners, managers,
operators and investors, as well as
commercial real estate developers
and partnerships in all of the major
CRE sectors: retail, office, hotel,
multi-family, shopping centers and
real estate investment trusts.
FINANCIAL SERVICES
INSURANCE SERVICES
VALUATION SERVICES
IN THIS ISSUE:
CBIZ BizTipsVideos@cbiz
Building and Maintaining
a Solid Family Business
PAGE 1
Deposit Bonds – For Those
Who Prefer Liquidity
PAGE 3
Peace of Mind and Potential
Savings – what could be bad?
PAGE 4
Case Study: Real Estate
Developer Benefits from
more than $8 million in
Tax Savings
PAGE 5

2. PAGE 21-800-ASK-CBIZ • www.cbiz.com/CommercialRealEstate CBIZ BizTipsVideos@cbiz
among the related business owners can create family
feuds, affecting whether the company will survive long-
term. Sometimes family members may find it hard
to express their disagreements. For example, a son,
fearing rejection, may not tell his father, the founder of a
successful advertising company, that he sees a different
business direction.
Scenarios like this are common. They can be detrimental
to the company’s future and disrupt family harmony.
Family and business strategic planning and regular family
meetings with the aid of a family business coach can
establish a productive communication structure that not
only helps resolve differences in management styles but
also fosters a culture of inclusion and responsibility.
For many families, particularly when elaborate tax and
estate plans are involved, communication regarding
financial affairs will also be important. A “family office
approach” led by a trusted advisor who facilitates
family meetings may be most effective. For the benefit
of younger generations, these discussions can include
information on the origins of the family’s wealth and
creation of a vision for its future stewardship, as well as
reporting on the current state of the family’s finances.
Who’s In? Who’s Not?
A strong business and legacy can be built and maintained
only if there are willing participants, performing clearly
defined roles with proficiency. Problems can arise when
family business owners are tempted or pressured to
promote family members who lack adequate skills. In
addition, offspring may be reluctant to join the business
in spite of the founder’s plans. These issues need to be
considered delicately, honestly and often.
Every business needs a good mix of people to help
it operate and grow. Many founders initially intend to
restrict outsiders from high-level positions; yet the
success of the business may depend on a quality or skill
not present in the family unit. Non-family employees may
add balance to the organization because they can view
the business from an unemotional position.
Succession Planning
If you take only one thing away from this discussion,
it should be this: If you intend for your business to
transition from generation to generation and you do
not have a succession plan in place, now is the time to
develop one.
Without a succession plan, the company can close
faster than it was built. The numbers tell the story.
According to Nancy Bowman-Upton in the Small Business
Administration publication Transferring Management in
the Family-Owned Business, only 30 percent of privately
owned businesses make it past the first generation. Yet,
at any given time, 40 percent of U.S. businesses are
facing a transfer of ownership issue. Sometimes this
is due to the succeeding family members not having
interest in running the business, but in most cases, it is
due to the absence of a succession plan.
Developing a structured plan needn’t be a daunting task
and is best constructed with the assistance of a third-
party professional or business advisor. Like other family
businesses, family real estate companies need to start
succession and estate planning early, help children and
other family members find their place, create financial
structures that work for all family members and maintain
open communication among the members during periods
of transition.
Founders, in particular, may not want to let go of the
company because they are afraid the successors are not
prepared, or they are afraid to be left without a formal
business role. It can be helpful to start planning “with
the end in mind” by determining when and how the
founder or other family members in key roles will retire
or leave the company. A realistic timetable would include
training and mentoring the next generation, involving
non-family members in the business operation when
appropriate and establishing a predictable and orderly
succession of authority and ownership.
In the End, It’s a Business
Like any business, a family business must have a solid
business model. Injecting family ties into the closely
held business model can provide both strength and
challenges. Family business research has established
that generational transition is the highest risk for
continuity and that the vast majority of families in
business fail to effectively deal with it. The good news
is that failures can be prevented by appropriately and
comprehensively preparing for generational succession.
A concrete succession plan along with mechanisms
for communication and guidelines for leadership and
management positions form a strong foundation for
success of the family business.
(Continued from page 1)
Marc J. Minker, CPA, PFS is the
CBIZ MHM Private Client Services
National Practice Leader. He can
be reached at 212.790.5700 or
mminker@cbiz.com.

3. PAGE 31-800-ASK-CBIZ • www.cbiz.com/CommercialRealEstate CBIZ BizTipsVideos@cbiz
BY ROBERT GRAND, VP RISK MANAGEMENT
Financial philosophies abound, but “Cash is king” is a
universal favorite.
Few individuals and corporations are sitting on green
mountains of cash; those fortunate few who do need an
army of CPAs to keep track of their finances still relish
an opportunity to elect liquidity before going hard with
their funds.
The good news is that there’s a helpful insurance product
called a “deposit bond” that offers the principal or
purchaser a very attractive, low-premium alternative to an
ordinary full cash deposit or traditional financing.
What Is A Deposit Bond?
A deposit bond acts like a promissory note and offers
an alternative to a full cash deposit. In exchange for a
fractional premium of the full financial obligation the
surety (bond) insurance company provides the obligee
(aka seller, service provider, vendor or developer) their
contractual promise to pay in the event of the principal’s
(aka purchaser or user of services) default.
Underwriting
Surety insurance companies are often regarded as
easier to work with than a traditional bank. Both have a
fairly conservative decision-making process, based on
creditworthiness and the principals’ ability to perform their
work and/or fulfill their financial obligations. Unlike many
other types of insurance where there is a calculated chance
of loss that is shared by a larger pool of similar risks, deposit
bonds are only intended for principals who are able to
perform and never create a loss to the insurance company.
Term
Deposit bonds may remain active in perpetuity, such as
a security for electric utility services, or they may be put
in place only temporarily to provide interim security until
payment in full is due at the time of sale.
Advantages of the Deposit Bond
For a fractional percentage of the full cash deposit, a
credit worthy “principal” can pay a small premium to
provide their obligee with a deposit bond to cover the full
obligation of the cash deposit. The deposit bond acts
as an equivalent form of escrow payment in lieu of a full
cash deposit. Employing this strategic leverage allows
the principal to preserve liquidity.
Utility Deposit Bonds
A popular use of a deposit bond is the recovery of
the large cash deposit required by utility companies.
Although the premium charged by the surety can vary
depending on the risk and financial condition of the
principal, utility bonds can be obtained for premiums
as low as 2.5 percent of the required cash deposit.
As an example, a large commercial real estate firm
or condominium association required by their electric
company to maintain $100,000 cash on deposit could
recover their deposit monies with an annual bond
premium of as little as $2,500.
Real Estate Escrow Deposit Bonds
Often, new luxury residential construction projects require
condominium buyers to provide the developer with a 10
percent cash deposit. These deposit monies are required
to be held in escrow by the developer. An escrow deposit
bond provides a perfect solution to help the developer
tap into the security of these escrow monies and obtain
working capital.
Using the example of a $20,000,000 luxury
condominium building, a developer in a hot real estate
market may be successful pre-selling 50 percent of the
units before construction begins or before construction
is completed. If 50 percent of the units are worth
$10,000,000 and those contracted buyers provide
10 percent cash deposits, there will be $1,000,000
of unusable cash sitting in an escrow account. For a
modest premium, as low as 1 percent (or $10,000),
a surety insurance company can front cash to the
developer that can be used, as needed, in an amount
that is equivalent to the total monies sitting in escrow –
or $1,000,000 in this example.
Bottom Line
Potentially any instance where a cash deposit is required
can be considered for replacement with a deposit bond
by a creditworthy principal. First you must obtain the
agreement of the obligee (third-party seller, service
provider, vendor or developer) to accept a deposit bond.
Once a principal secures approval from their obligee to
accept a deposit bond, the obligee provides the contract
or bond form, and an insurance broker then completes
the underwriting process with their affiliate surety
insurance company to produce the bond.
DepositBonds–
ForThoseWho
PreferLiquidity
For more information call or email
Robert Grand, Vice President Risk
Management, CBIZ Insurance Services
Inc. 561.994.2210 ext. 30 or
rgrand@cbiz.com.

4. PAGE 41-800-ASK-CBIZ • www.cbiz.com/CommercialRealEstate CBIZ BizTipsVideos@cbiz
BY GREG CRYAN
R
unning and growing a business requires many
talents, not the least of which is engaging
professional service providers with specialized
expertise to support your operations, management
responsibilities and leadership decisions. Here’s the
key, though: Whether you are building a new relationship
or have received many successful years of service, you
need to be assured that your advisors continue to match
your company’s evolving needs regarding industry and
service area regulatory changes, best practices and
pricing models.
This is particularly true with risk management.
Regardless of the size of your enterprise, successfully
managing risk is an ongoing and dynamic process that
is much more than purchasing a policy and filing away a
pile of paper once a year.
Your insurance broker and risk management advisors
should be actively working with you to reduce, eliminate
and transfer as much risk as possible, while minimizing
the total annual impact to your budget, inclusive
of insurance premiums, applicable deductibles,
self-insured retentions and self-insured exposures.
Conducting an insurance audit is the best way to ensure
this outcome.
Features and Benefits of an Insurance Audit
An insurance audit takes a fresh look at your current
insurance policies coverage, identifying any gaps and
noting limitations, exclusions and warranties, conflicting
terms, and un-scheduled underlying policies. This process
should take no more than a couple hours of your time.
Even if third parties, including lenders, deem that your
coverage is adequate, other exposures outside of their
interest may be uninsured or under insured. The audit
process will provide you with additional peace of mind
and potential for savings; it will be time well spent.
Here is what to expect from a comprehensive
insurance audit.
n Review of Standard Contract(s)/Lease Agreement(s);
Schedule of Values/Locations
n Review Completeness and Accuracy of Named
Insureds
n Review Coverage Observations by Policy Type
Adequacy of Coverage (Scope/Depth Matching
their business)
Sufficiency of Limits
Levels of Deductibles and Retentions
Territory of Coverage
Concurrency of Coverage
Coordination of Coverage Limits
Suitability of Coverage Forms (especially when
existing forms are non-ISO)
Material Coverage Problems (exclusions,
limitations, conditions, warranties, subjectives)
n Additional Coverage Recommendations
Missing Coverage(s)/Policy(s)
Added Value Services Provided by the Agent of
Record
n Portfolio or a Master Program vs. Individual Policies
Provides Great Leverage
n Comparison of Current Pricing vs. Market
Competition, Resulting in Reduced Premiums
Depending on your risk tolerance, you may consider
self-insuring part of your risk. Risk sharing through
the purchase of insurance is often advisable, but an
audit will provide the cost benefit. Standard placement
of insurance is both experience and market driven.
A complete analysis of all factors has provided great
coverage protection and financial benefit to our clients.
Bottom Line
As your business expands, your risk increases. As well,
industry regulations may change over time and insurance
products and pricing respond to regulatory and market
changes. Your risk advisor and insurance brokerage
experts specialize in protecting assets in the commercial
real estate sector. Take the time to meet with your skilled
team of insurance advisors to identify creative insurance
and risk management opportunities as a regular feature
of client service.
For more information about the insurance audit
process, the CBIZ no-cost, no-obligation
insurance coverage and cost audit or
about mitigating risk in commercial
real estate in general, please contact
Greg Cryan, President, Southeast
Region, CBIZ Insurance Services, Inc.,
678.297.7776 or gcryan@cbiz.com.
PeaceofMindandPotentialSavings–whatcouldbebad?
DISCLAIMER: This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional
advice. This information is general in nature and may be affected by changes in law or in the interpretation of such laws. The reader
is advised to contact a professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in
connection with the use of this information and assumes no obligation to inform the reader of any changes in laws or other factors that
could affect the information contained herein.

5. PAGE 51-800-ASK-CBIZ • www.cbiz.com/CommercialRealEstate CBIZ BizTipsVideos@cbiz
R
epairs and maintenance are anything but routine
when working with large-scale commercial
properties. Fortunately, many renovation
expenses qualify for accelerated tax benefits and other
considerations. Tax filings, depreciation schedules and
building plans could contain opportunities to combine
benefits and maximize your present value of tax savings,
as a real estate developer recently discovered.
In this case, an evaluation of the developer’s operations
led to an acceleration of development-related expenses
and present value tax savings of more than $8 million.
Issue
A real estate developer reached the end of its second
renovation in two years. At the same time, it was also
finalizing the acquisition of a property that underwent
building updates. CBIZ MHM identified that all three
projects presented opportunities to accelerate some of
the developer’s renovation expenses.
Solution
By examining the developer’s tax filings, depreciation
schedules and building plans, our team separated the
assets that must be depreciated over 27.5 or 39 years as
part of the building’s costs from those that could be placed
into shorter 5, 7 and 15-year lives. One significant asset
that had been depreciated over a long life qualified for a
shorter one, which allowed for a catch-up of depreciation
expense that hadn’t previously been claimed.
CLIENT PROFILE
Annual Revenue:
$165 million
Industry:
Real Estate
Geographic Footprint:
New York City and Washington D.C. metro areas
Ownership Structure:
Holding company composed of family-owned
partnerships
Our team also considered what the real estate developer
renovated, which allowed for benefits on top of those
identified by the cost segregation study. The developer’s
updates to its building’s lighting, plumbing, windows and
HVAC systems qualified as repairs under the recently
enacted tangible property regulations.
Outcome
The cost segregation studies and the evaluation of the
tangible property regulations on the three renovation
projects allowed the developer to accelerate several
development-related expenses and significantly reduce its
current year tax liability. The cumulative present value of
the tax savings to the client exceeds $8 million.
CASE STUDY
RealEstateDeveloperBenefitsfrom
morethan$8millioninTaxSavings
For more information on how you
can benefit from cost segregation
or the tangible property regulations,
please contact Larry Rosenblum
at 561.922.3006 or
lrosenblum@cbiz.com.